2025 (4) TMI 653 - AT - Income Tax

Validity of reassessment u/s 147 - notice issued beyond the statutory three-year period - approval from the competent authority has not been taken by the A.O u/s 151 - HELD THAT - The report of the A.O is silent regarding such physical service of notice on 06.04.2018 for which whether permission of the competent authority has been taken or not this aspect is absolutely absent in the said report. DR could not dispute the service of notice to the assessee on 06.04.2018 which is definitely beyond three years from the end of the relevant assessment year which ended on 31.03.2018. The law mandates as per Section 151(ii) of the Act that in case where it is beyond the period of three years from the end of the relevant assessment year the competent authority is the Pr. CIT and his approval is required but in this case no such approval has been obtained by the department and therefore no evidence has been placed before this Bench regarding such approval from the Pr. CIT for initiation of reassessment proceedings. The revenue authorities are bound by the Act both in respect of substantive and procedural laws. That on examination of the facts as afore-stated it is clear that the A.O has failed to comply with the procedural laws as enshrined u/s. 151(ii) - Decided in favour of assessee.

Summary

ISSUES PRESENTED and CONSIDERED

The primary legal issue considered was whether the reassessment notice issued to the assessee was valid under the Income Tax Act, specifically concerning the timing and approval requirements outlined in Section 151(ii). The core question was whether the notice issued beyond the statutory three-year period without the necessary approval from the Principal Commissioner of Income Tax (Pr. CIT) rendered the reassessment proceedings void.

ISSUE-WISE DETAILED ANALYSIS

Relevant Legal Framework and Precedents

The legal framework centered around Section 151(ii) of the Income Tax Act, which mandates that if a notice for reassessment is issued beyond three years from the end of the relevant assessment year, it requires prior approval from the Pr. CIT. The assessee's counsel argued that the lack of such approval invalidated the notice and subsequent proceedings. Relevant precedents cited included decisions from various cases that emphasized the necessity of adhering to procedural requirements for reassessment notices.

Court's Interpretation and Reasoning

The Tribunal interpreted the legal framework to mean that strict compliance with Section 151(ii) is necessary for the validity of reassessment proceedings. The Tribunal noted that the digital notice was sent within the permissible period but emphasized that the physical notice was received beyond the three-year limit. The Tribunal found the absence of evidence showing Pr. CIT's approval for the late notice to be a critical procedural lapse.

Key Evidence and Findings

The key evidence included the report from the Assessing Officer (A.O.), which confirmed the digital notice was issued in time but was silent on the physical notice's compliance with the approval requirement. The Tribunal found no evidence presented by the Revenue to demonstrate that the necessary approval was obtained for the notice issued beyond the statutory period.

Application of Law to Facts

The Tribunal applied Section 151(ii) to the facts, concluding that the lack of Pr. CIT approval for the notice served beyond the three-year period rendered the reassessment order invalid. The Tribunal emphasized that both substantive and procedural requirements of the law must be fulfilled to uphold the validity of reassessment proceedings.

Treatment of Competing Arguments

The Tribunal considered the argument from the Revenue that the digital notice was timely and valid. However, it found the lack of evidence for Pr. CIT approval for the late physical notice to be decisive. The Tribunal concluded that the procedural lapse could not be overlooked, thereby favoring the assessee's argument.

Conclusions

The Tribunal concluded that the reassessment proceedings were invalid due to the failure to comply with Section 151(ii). The absence of Pr. CIT approval for the notice served beyond the statutory period was a critical procedural defect, leading to the quashing of the reassessment order.

SIGNIFICANT HOLDINGS

Preserve Verbatim Quotes of Crucial Legal Reasoning

The Tribunal held that "the revenue authorities are bound by the Act both in respect of substantive and procedural laws," and that "the A.O has failed to comply with the procedural laws as enshrined u/s. 151(ii) of the Act."

Core Principles Established

The judgment reinforced the principle that procedural compliance, particularly obtaining necessary approvals for reassessment notices, is essential for the validity of such proceedings. The decision highlighted the importance of adhering to statutory timelines and obtaining requisite approvals to uphold the integrity of the reassessment process.

Final Determinations on Each Issue

The Tribunal determined that the reassessment order was void ab initio due to procedural non-compliance. Consequently, all subsequent proceedings based on the invalid reassessment order were deemed non-est in the eyes of the law. The appeal was allowed in favor of the assessee without addressing the merits, as the procedural issue was dispositive.